Unless you are a first-time homebuyer, you may end up in a situation where you are buying and selling a house at the same time. This makes the home buying and selling process a little more complicated. What happens if you buy a house before you have sold the house you are living in? Should you sell the house you live in first, buy a house first, or can you buy a house and sell a house at the same time?
There is more than one approach you can take when you are trying to buy and sell a house at the same time. Which approach is better depends on your finances, the market, and the reasons for moving? The easiest way to do this is to sell your house first. This way you aren’t covering two mortgage payments when you go to sell your house. However, there are ways to arrange a sale and purchase of a home at the same time. Keep reading. We will explain the options so you can better decide.
Selling first, then buying
Pros of selling a house first
- You don’t have to worry about how long your house will take to sell
- You don’t have to cover 2 mortgage payments
- You know how much equity you have to work with
- You won’t be rushed to buy
Cons of selling a house first
- You won’t be able to make offers on a house while you are waiting
- You will probably have to find a rental or temporary living situation
- You will have to pack and move twice
While this is the easiest way of buying and selling a house at the same time, it’s not necessarily less stressful. If you sell your house first, you don’t have to rush into purchasing a house. You can take your time and find the house you truly want. But, it often involves finding a place to rent temporarily while you are looking for a house. Depending on when you move out of your house, you could be stuck renting for longer than you anticipate. Finding a short-term rental can be a hassle, especially if you don’t know how long you are going to need to rent.
Right now there is a shortage of Santa Fe homes for sale, which means selling your house may go more quickly than buying a house. This can make the process easier. Once you sell your house, you may have equity to work with and can immediately start looking for a new house.
Things to do before you sell your house
Before you consider selling your house, talk to a realtor. The Bigelow Team of Santa Fe real estate brokers can help you decide which step to take first. If you plan to sell your house so that you can buy another, you need to be certain that you won’t have any issues financing the second house. It will be easier to qualify for a mortgage once you sell your house, but it’s a good idea to talk to a real estate agent before you start the process. Knowing your credit score, your income to debt ratio, and how much you’d like to spend on your new house, will help you prepare for buying a house once you sell your current home.
Buying a house first, then selling
Pros of selling first
- You will have more time to look for a house
- You will be able to move into your new house more quickly
- You only have to move once
- If the home sale falls through, you still have a house to live in
- You will have more time to prepare for selling your current house
Cons of selling first
- You may not be able to get financing
- You may have to pay two mortgages while you sell your house
- You may feel more pressure to sell your house quickly
- You will be responsible for taxes and insurance on two houses
Most people will not be able to qualify for a second mortgage while they currently have a mortgage. Even if you can qualify, you may not be able to get the kind of loan you would get if you sold your house first. However, there are some options for buying a house first.
Use your savings
If you have enough in savings you can use your savings for a down payment to finance a loan on a second home. Once you sell your house, you can either keep the savings in your home as equity or take the profit from the sale of your home to reinvest in savings.
Rent your house
If you’re ready to buy, but not quite ready or committed to selling your house, you could rent it temporarily until you are prepared to sell it. This has its pros and cons but it may allow you a little more time to prepare for selling it.
Ask for an extended closing
If you buy a home before your house is sold, you can ask for a contingency that allows you to extend the closing date by 30-45 days. In a good market, this should give you the time to wrap up the sale of your current home before closing. You can then use the equity in your house to use towards the purchase of the new house.
Buying and selling a house at the same time
There are now programs for people just like you, that are trying to buy and sell a house at the same time. Lenders are aware of the predicament this puts buyers in and have created a few programs just for this situation. Talk to your realtor to see if they can help you find a lender to work with.
You may qualify for a bridge loan. A bridge loan is a short-term loan that provides you with the money for a down payment while you are selling your house. This is one way that lenders make buying and selling a house at the same time possible. You can borrow the money for a down payment on your new home. Once you sell your house, you repay the bridge loan.